A lawyer is an advocate, but an accountant is bound by rules and ethics that do not permit advocacy. Whereas an attorney is bound to represent his or her client no matter what the client does, an accountant cannot defend a client who does something that violates the accounting industry’s Generally Accepted Accounting Principles (GAAP).
Accounting is a fairly complex field that the entrepreneur needs to understand at least at a basic level in order to communicate with accountants, auditors, lenders, bankers, and investors, in addition to internal and external stakeholders.
In the beginning, the accountant may set up the company’s books and maintain them on a periodic basis, or, as is often the case, the entrepreneur may hire a bookkeeper to perform the day-to-day recording of transactions.
The accountant will also set up control systems for operations, as well as payroll. The entrepreneur then goes to the accountant during tax season. Once the venture is beyond the start-up phase and is growing consistently, it’s a good idea to do an annual audit to determine whether the company’s accounting and control procedures are adequate. The auditors may also require a physical inventory. If everything is in order, they will issue a certified statement, which is important should the entrepreneur ever decide to take the company public.
Accountants are also a rich networking source in the entrepreneur’s search for additional members of the new venture team. Like attorneys, accountants tend to specialize, so it is wise to find one who is used to working with young, growing businesses.
Indeed, the accountant who takes a business through start-up and early growth will probably not be the best person to take care of the company’s needs when it reaches the next level of growth. As the financial and record -keeping needs of the business increase and become more complex, the entrepreneur may have to consider a large firm with expertise in several areas.